Liquidity, Information, and Infrequently Traded Stocks

Easley, David; Kiefer, Nicholas M.; O’Hara, Maureen; Paperman, Joseph B.

doi:10.1111/j.1540-6261.1996.tb04074.x

Cited by 1,197 publications

(898 citation statements)

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“…PIN (Easley et al, 2002) is the result of the measurement of information asymmetry in the capital market using the sequential bargaining model of Easley, Kiefer, O'Hara and Paperman (1996), which was later refined by Easley, Hvidkjaer and O'Hara (2002) (the EHO model) and used in this study because it has been consistently validated in the international literature (Abad & Rubia, 2005;Cruces & Kawamura, 2005;Duarte & Young, 2009;Aslan et al, 2011). In Brazil, although the number of studies that use this metric are few, Barbedo et al (2009) attest its consistency and applicability.…”

Section: Information Asymmetry Measures: Thementioning

confidence: 99%

“…The first variable was the stock risk, which according to Easley et al (1996) is positively related to information asymmetry because this asymmetry creates a new type of systematic risk in the market, the risk of information, which is the existence of private information in the stock market based on negotiations. For Aslan et al (2011), an asset with a higher volume of private information tends to be riskier, and therefore, it is natural to require a higher expected return.…”

Section: Variables Related To Information Asymmetrymentioning

confidence: 99%

“…Thus, based on the literature, several variables were identified as potentially related to PIN: risk (Easley, Kiefer, O'Hara, & Paperman, 1996), return (Easley, Hvidkjaer, & O'Hara, 2002), abnormal return (Clarke & Shastri, 2000), liquidity (Amihud & Mendelson, 1989), volatility (Halov & Heider, 2011), capital structure (Leland & Pyle, 1977), cost of capital (Easley & O'Hara, 2004), size (Aslan, Easley, Hvidkjaer, & O'Hara, 2011), market-to-book ratios (McLaughlin, Safieddine, & Vasudevan, 1998), price/earnings (Clarke & Shastri, 2000), dividend policy (Myers & Majluf, 1984), earnings management (Aboody, Hughes, & Liu, 2005) and corporate governance (Chen, Chen, & Wei, 2009). …”

Section: Introductionmentioning

confidence: 99%

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Assimetria de informação na negociação de ações, características econômico-financeiras e governança corporativa no mercado acionário brasileiro

Martins

Paulo

2014

Rev. contab. finanç.

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This study sought to investigate the relationship between information asymmetry in the stock trading, economic and financial characteristics and corporate governance of listed companies in the Brazilian stock market in 2010 and 2011. To this end, the study relied on a theoretical framework for information asymmetry in the capital market to measure the asymmetry's magnitude based on the intraday stock-trading data of 194 companies. The primary results demonstrated that the informational asymmetry in the stock trading was positively related to the risk, return and liquidity of the shares as well as the cost of equity and the size of the companies. In addition, the asymmetry was negatively related to the abnormal return of shares. During the investigated period, the information asymmetry relationship with the liquidity and size (positive) and the abnormal return (negative) were at odds with previous research. The reasons for our results may be related to specific aspects of the Brazilian market, for example, in the case of abnormal returns, the deceleration of the Bovespa Index (IBovespa) or the reflection of the average return to negotiators without insider information during the period. In case of liquidity and size, the high index of issuance and negotiation of preferred shares may have influenced the results. Thus, this research contributes to the analysis of idiosyncratic characteristics of the capital market of a developing country, such as information asymmetry in stock trading and its association with the economic and financial characteristics and corporate governance of companies in the Brazilian stock market.

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Section: Information Asymmetry Measures: Thementioning

confidence: 99%

Section: Variables Related To Information Asymmetrymentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Assimetria de informação na negociação de ações, características econômico-financeiras e governança corporativa no mercado acionário brasileiro

Martins

Paulo

2014

Rev. contab. finanç.

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“…According to Easley et al (1996), informed traders submit more buy (respectively sell) orders when they hold good (respectively bad) signal information. Hence, the difference between informed and uninformed trading measures the degree of information asymmetry in the market.…”

Section: Stock Liquidity and Information Asymmetry Proxiesmentioning

confidence: 99%

Does Corporate Governance Affect Stock Liquidity in the Tunisian Stock Market?

Loukil¹,

Yousfi

2012

SSRN Journal

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Abstract:The aim of the current paper is to study the link between the effects of corporate governance on information asymmetry problems and stock liquidity in the Tunisian Stock Market. We use a sample of 49 Tunisian firms listed between 1998 and 2007. Our results show that corporate governance has direct and indirect effects on stock liquidity. Threat of expropriation exerted by family and foreign shareholders discourages reluctant investors, which decreases stock liquidity. In contrast, they invest their capital in State controlled firms.In fact, State is regarded as an effective controller rather than a shareholder. The State involvement in Tunisian firms is considered as state guarantee for investors, which increases stock liquidity. Our results provide evidence that some attributes of corporate governance improve stock liquidity because they reduce information asymmetry.

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“…One strand of this literature analyzes the effects of "cream-skimming" and payment for order flow (e.g. Easley et al [1996], Bessembinder and Kaufman [1997], Battalio et al [1997], Parlour and Rajan [2003]). …”

Section: Introductionmentioning

confidence: 99%

Adverse selection, market access, and inter-market competition

Hoffmann

2016

Journal of Banking & Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractWe study the role of informed trading in a fragmented financial market under the absence of inter-market price priority. Due to frictions in traders' market access, liquidity providers on alternative trading platforms may be exposed to an increased adverse selection risk. As a consequence, the main market dominates (offers better quotes) frequently albeit charging higher transaction fees. The empirical analysis of a dataset of trading in French and German stocks suggests that trades on Chi-X, a lowcost trading platform, carry significantly more private information than those executed in the Primary Markets. Consistent with our theory, we find a negative relationship between the competitiveness of Chi-X's quotes and this excess adverse selection risk faced by liquidity providers in the cross-section. Our results have some implications for the design of best-execution policies.Keywords: MiFID, Inter-market competition, Adverse selection, Transaction fees JEL Classification: G10, G14, G241 Non-technical summaryThis paper studies the role of adverse selection in competition among stock exchanges when price priority across markets is not enforced, i.e. the regulator does not explicitly prohibit trades to execute at prices that are inferior to the best available price across all relevant trading platforms. The analysis is motivated by the absence of a so-called "trade-through rule" under MiFID in the European Union, which stands in contrast to the Regulation National Market System (RegNMS) in the United States that protects the currently best quote by forcing exchanges to route incoming orders to other markets in case they offer better terms of trade.First, we present a two-market version of the Glosten and Milgrom (1985) sequential trade model, where one market (the "Primary Market") can be accessed by all agents while trading in the other market (the "Entrant Market") requires agents to have access to a multi-market trading technology. This is motivated by the fact that searching for the best price among multiple venues is costly and computer technology helps to facilitate this process. Additionally we assume that the Primary Market charges higher transaction fees, which is motivated by the lower transaction fees observed on newly created trading platforms across Europe post-MiFID. We show that under the absence of a trade-through prohibition, this market access friction gives rise to differences in the adverse...

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Liquidity, Information, and Infrequently Traded Stocks

Cited by 1,197 publications

References 12 publications

Assimetria de informação na negociação de ações, características econômico-financeiras e governança corporativa no mercado acionário brasileiro

Assimetria de informação na negociação de ações, características econômico-financeiras e governança corporativa no mercado acionário brasileiro

Does Corporate Governance Affect Stock Liquidity in the Tunisian Stock Market?

Adverse selection, market access, and inter-market competition

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